Over the past few months, as I’ve been mulling over topics for this wine law blog, several people have expressed their surprise at the news that a Bay Area winery was recently cited and fined for labor violations involving over 20 unpaid volunteers. The Department of Industrial Relations investigated when one of the workers was injured and, unsurprisingly, was not covered by workers’ compensation insurance. The fines assessed were so prohibitive – roughly $115,000 – that the winery was forced to shut its doors. It has come as a shock to many in the wine industry that the use of volunteers not only violates California labor laws, but can have such devastating consequences.
The Bay Area case is a wake-up call. For those in the industry who have used volunteers in the past, you should re-think that practice.
If you are a for-profit business (there are exceptions for non-profits, religious, and charitable organizations), you may not use unpaid volunteers without running afoul of California labor laws. California law defines the term “employ” very broadly to include “to suffer or permit to work.” Your volunteers may not be suffering, but they are performing work for you, and so are technically considered employees entitled to minimum wage, meal and rest breaks, and overtime pay. You as their employer are required to make payroll deductions, and to provide workers compensation coverage. The penalties for non-compliance can be severe, and include back wages, liquidated damages, and various other penalties.
You might be able to use unpaid interns in your for-profit business, but there are several criteria that must be met if your interns are to avoid classification as employees. For example, the internship must be primarily for the intern’s benefit, your intern must not displace other employees and must work under close supervision of regular employees or staff, you may not derive any “immediate advantage” from the intern’s activities, the internship must be similar to training that would be provided in an educational environment, there can be no guarantee or expectation of a job for the intern at the conclusion of the internship, and it must be understood that the intern is not to be paid for his/her time. In short, your intern’s experience must be primarily an educational one to avoid application of state and federal labor laws. Interns who are used simply to supplement or augment your existing workforce will be considered employees entitled to minimum wage and overtime.
Wineries that are considering the use of volunteers or unpaid interns should reconsider, or at a minimum seek the advice of counsel before doing so. Those that find themselves facing enforcement proceedings for labor law violations should do the same, as employers are entitled to all the normal due process protections, including the right to notice, an opportunity to be heard, and to be represented by counsel.